Note

Loans Held for Sale

Loans held for sale represent the guaranteed portion of SBA loans originated and are reflected at the lower of aggregate cost or market value. As of

March 31, 2020,

$18.0

million SBA loans were held for sale, consisting of

$11.7

million commercial and industrial loans and

$6.3

million commercial real estate. There were

$15.3

million of loans held for sale at

December 31, 2019,

consisting of

$10.2

million commercial and industrial loans and

$5.1

million commercial real estate.

The Company generally sells the guaranteed portion of its SBA loans to a

third

party and retains the servicing, holding the unguaranteed portion in its portfolio. When sales of SBA loans do occur, the premium received on the sale and the present value of future cash flows of the servicing assets, less the discount of the retained portion of the loan are recognized in income.

Servicing assets represent the estimated fair value of retained servicing rights, net of servicing costs, at the time loans are sold. Servicing assets are amortized in proportion to, and over the period of, estimated net servicing revenues. Impairment will be evaluated based on stratifying the underlying financial assets by date of origination and term. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Any impairment, if temporary, would be reported as a valuation allowance.

Serviced loans sold to others are

not

included in the accompanying consolidated balance sheets. The total amount of such loans serviced, but owned by

third

party, amounted to approximately

$13.5

million and

$13.6

million at

March 31, 2020

and

December 31, 2019,

respectively. The servicing asset has a carrying value of

$198,000

and fair value of

$272,000

March 31, 2020.

Income and fees collected for loan servicing are credited to noninterest income when earned, net of amortization on the related servicing assets. The servicing asset is included in other assets on the consolidated balance sheets.

The following table presents an analysis of the activity in the SBA servicing assets for the

three

months ended

March 31, 2020

and

2019:

(In thousands)	For the three Months Ended March 31,
	2020			2019
Beginning balance	$	201			37
Servicing rights capitalized		2			66
Servicing rights amortized		(5	)		(4	)
Ending balance		198			99